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Australian Renewable Energy Market Update – July 2023

1 Aug 2023

Hunter Offshore Wind Region Declared

The federal government has officially declared Australia’s second offshore wind development zone, covering nearly 2,000 kilometres square area off the coast of the New South Wales. The declared region will be capable of hosting up to 5GW of capacity and interest has been higher from both Developers and community stakeholders.  The period for developers to submit feasibility licence applications for proposed offshore wind projects in the Hunter area will open on 8 August 2023 and close on 14 November 2023. The announcements was met with much interest amid ongoing debate about expected development costs and timelines for development of an offshore wind industry in Australia. Several consortia have now made public announcements regarding their intention to bid in the license process.

Stalled transition and delays to coal closure?

This month featured increasing media commentary and realisation that the delivery of renewable energy projects to facilitate the transition and the retirement of the coal generation fleet is going to likely to be delayed. 

This was highlighted by the announcement of an extension to the life of Vales Point Coal Power station in NSW and calls for a delay to the closure of Eraring Coal Power station. The announcement by Sev.en Global, the owners of Delta Electricity, to extend the life of Vales Point Coal Power station from 2028 to 2033. Although unsurprising given their recent acquisition of that asset, the announcement explicitly pointed to delays in transmission and new projects, whilst maintaining their investment in maintenance warranted a life extension to the 50-year plant. This was also accompanied by calls for the NSW to intervene and delay the closure of Eraring power station. The state government has said that they will delay any announcements or action until at least next month, after it receives a “health check” on the state’s energy security.

What does this mean for the transition?

Recent developments indicate that the transition is likely to be more disjointed and slower than expected. This is likely to lead to higher sustained spot and future prices, as well as increased competition from buyers of Renewable Energy projects. For developers of renewable energy projects, the focus will remain on managing challenges with project development and supply chains to ensure that projects are able to meet publicly announced timelines

Electricity spot market in June

Spot electricity prices continued to trend lower during the month of June, with TWA prices dropping across all regions.

Vic and TAS remained the least volatile of states for low cap returns (i.e. few intervals where prices exceeded $300), however arbitrage opportunities for Batteries remained present, supported by sustained periods of very low or negative pricing.  In SA we saw low prices in first half of the month. This included several periods of extreme negative pricing on the 16th and 17th, before a sustained period of elevated pricing from the 26th to the 30th. The periods of high prices were accompanied by Lack of Reserve forecasts issued by AEMO.

In QLD and NSW, prices were generally moderate but spiked during the 19th and 22nd following cold weather, low solar generation and implementation of localised constraints reducing reserve margins across the states. Since the closure of Liddell Power Station in April, QLD and NSW have experienced a high priced couple of months as the markets adjust to the exit of almost 20% of NSW’s generation capacity. 

Did you know?

Green hydrogen is defined as hydrogen produced by splitting water into hydrogen and oxygen using renewable electricity.